This report was prepared in collaboration with Carlos Antonio Diez and under the supervision and guidance of Sebastián Martínez, within the context of Hellohello’s personal objectives for the first and second quarters of 2024. I deeply appreciate the time and dedication both have contributed to this project.
Introduction
In the world of decentralized wallets based on blockchain technology, the private key is a fundamental pillar of security and custody. A private key is a secret numeric sequence that allows proof of ownership over assets and authorization of transactions. To simplify the visualization and writing of these keys, the BIP-39 standard is commonly used, transforming the key into a sequence of random and unique words, thereby generating what is known as a recovery phrase or seed phrase.
While a properly used recovery phrase can ensure the security of funds and easy recovery, it is also crucial that users manage and store it correctly. If lost or destroyed, it becomes impossible to recover, greatly increasing the chances of permanently losing access to funds. According to estimates by the firm Chainalysis, 20% of the bitcoins in circulation have been lost and cannot be recovered.
It is precisely at the point of registration and creation of the recovery phrase that we identify a recurring pain point in wallets, and where we are interested in exploring whether there is an opportunity to contribute to improving the experience and helping minimize the loss of access to funds.
This report details the process of designing and developing prototypes for a decentralized wallet: through research, user review analysis, and the creation of proto-personas, critical points were identified, and solutions are suggested to remove friction and improve the overall experience.
Methodology
- Research: A desk research was conducted on decentralized wallets from both the Bitcoin and Ethereum networks, including reading and analyzing the paper The U in Crypto Stands for Usable (Voskobojnikov, Wiese, Koushki, Roth, Beznosov), as well as various articles related to private key management and security, such as Private Key Schemes (Bitcoin Design Community) and How to Protect Your Bitcoin from $5 Wrench Attacks (Jameson Lopp).
- Benchmark: The account creation flows of the six most popular wallets focused on decentralization (MEW Wallet, Muun, Metamask, Green Wallet, Trust Wallet, and CoinWallet) were analyzed. The goal was to identify screens, components, and suggested dynamics for creating decentralized wallets.
- Review Analysis: Reviews from the last three years of the same six wallets analyzed in the benchmark were examined to identify the most common pain points and the clearest strengths.
- Proto-persona: Three proto-personas were created to represent new users in the cryptocurrency world with almost no knowledge of decentralized wallets. This helped align the design with the needs and expectations of this type of user.
- Iterative Design: Four versions of the prototype were developed, each tested with real users. The lessons learned from each round of testing were incorporated into each new iteration.
Desk research
New and experienced users face the same issues
The study “The U in Crypto Stands for Usable: An Empirical Study of User Experience with Mobile Cryptocurrency Wallets” reveals that both new and experienced users face general and domain-specific UX issues that, in addition to frustration and disengagement, can lead to dangerous errors and irreversible monetary losses. The study also highlights the shortcomings of the current UX of wallets, as well as user misconceptions, some of which stem from their understanding of conventional payment systems.
Domain-Specific UX Issues
- Security: Users may not fully understand the security risks associated with cryptocurrencies and digital wallets.
- Fund Recovery: Users may not know how to recover their funds if they lose their private key.
- Transactions: Users may have unrealistic expectations about the speed and cost of transactions.
User Misconceptions
- Free Transactions: Some users believe that cryptocurrency transactions are free, when in fact, there are always fees for verifying and adding transactions to the blockchain. This confusion arises either from a lack of knowledge or because many large centralized platforms, such as Binance or Coinbase, absorb these costs for internal transfers, like coin swaps, to remain competitive.
- Reversible Transactions: Some users think cryptocurrency transactions can be reversed, when in fact, they are irreversible.
- Transaction Cancellation: Some users believe that cryptocurrency transactions can be canceled, but in reality, they cannot be canceled once confirmed.
The context dictates the solution
The article “Private Key Schemes” from bitcoin.design argues that the choice of an appropriate private key management scheme (Cloud Auto-Backup, Manual Backup/Recovery Phrase, External Signers, and Multisig) depends on the value of the assets, the technical knowledge available, and the frequency of use. It also suggests a spectrum of schemes, from simpler options for occasional use to more robust ones for critical use, based on the following criteria: How much Bitcoin are you willing to risk in case of loss or theft? How frequently do you make transactions? Are you comfortable managing multiple keys and devices?
Beyond digital security
On the other hand, the article “How to Protect Your Bitcoin from $5 Wrench Attacks” from Casa’s blog addresses the concept of physical extortion attacks in the cryptocurrency world. It serves as a reminder that the security of cryptocurrencies depends not only on the strength of cryptography but also on the user’s physical security and privacy. By taking proactive measures to protect your private keys and minimize exposure, you can significantly reduce the risk of becoming a victim of such attacks.
Benchmark
The account creation flows of MEW Wallet, Muun, Metamask, Green Wallet, Trust Wallet, and CoinWallet were analyzed, focusing on screens related to creating new wallets, information about blockchain technology, recovery phrases, and other security measures. This comparison allowed us to identify best practices, but also revealed recurring issues and solutions that did not address the pain points experienced by many users.
- Screens with High Cognitive Load: In applications like Trust Wallet and MEW Wallet, the initial screens of the flow contain an overload of information, which can hinder users from achieving their primary goal: creating a virtual wallet.
- Security Recommendations: All applications include instances to inform users about the benefits of decentralized wallets and the commitments they entail. However, these texts are often lengthy and dense, which does not encourage reading.
- Autonomy Messages: All applications include messages referring to self-custody, Web3 wallets, and the idea of “being your own bank.”
- Quick Start: Platforms like Muun and Coinbase start their flows with a PIN or biometric registration. Only after the wallet is functional do they mention self-custody measures.
- Recovery Phrase Alternatives: Muun and MEW offer the option to back up the recovery phrase in users’ personal accounts, such as Google Drive or OneDrive.
- Recovery Phrase Control: Green Wallet and Trust Wallet include a step in their flow to verify if the user correctly wrote the 12 words of the recovery phrase, asking them to complete some of the provided 12 words.
- Hybrid Wallet: Coinbase offers the option of self-custody by providing a recovery phrase only if the customer wants total control over their funds. By default, private keys are stored and managed by the platform.
Review Analysis
A manual analysis of 5,000 negative reviews from 2022 to 2024 for MEW Wallet, Muun, Metamask, Green Wallet, Trust Wallet, and Coin Wallet was conducted to identify the most common pain points. This analysis allowed us to quickly identify patterns to consider:
- Simple User Interface: Make the user interface as easy as possible to navigate and understand.
- Clear Information: Provide clear information about the status of transactions, errors, and security risks.
- Education: Offer users information on basic concepts of cryptocurrencies, blockchain, and digital wallets.
- Customer Support: Provide a point of contact between the user and the wallet where they can feel supported and assisted with any issues they may encounter.
Creation of Proto-Personas
Three proto-personas were created to represent users with experience in centralized wallets but limited knowledge of blockchain and features specific to decentralized wallets, such as the recovery phrase. These profiles served as the basis for designing a User Archetype seeking to register for a decentralized wallet, expecting an intuitive and familiar experience.
To validate the prototype, the previously established Archetype was used to set the guidelines for selecting participants for usability testing.
Crypto Novice with Experience in Centralized Wallets
Motivations:
- Protect their cryptocurrencies from potential hacks or fraud.
- Learn about best security practices in the cryptocurrency world.
- Diversify their cryptocurrency portfolio across different platforms.
Needs:
- A decentralized wallet that is easy to use and intuitive, with a user-friendly interface.
- Educational resources and guides on how to use the wallet and cryptocurrencies securely.
Pain Points:
- Complexity of decentralized wallets compared to centralized platforms.
- Limited familiarity with technical concepts like blockchain and private keys.
- Risk of losing access to funds.
Iterative Design
The iterative design approach allowed for continuous improvement through rapid testing and feedback cycles, ensuring that the design evolved according to the needs identified after each usability test conducted.
Key Learnings
After conducting user tests, we were able to identify common issues that confirmed the findings from the previous analysis, as well as new opportunities for improvement:
- Confusion Around the Term “Recovery Phrase” (“Seed Phrase”): The word “phrase” caused confusion among some users, as they expected a coherent sentence rather than disjointed words. To address this, a simple onboarding process was created to explain its features, and confirmation screens were added to emphasize its importance.
- Expectations of Key Recovery: Users tend to assume that all keys can be recovered or reset. It is crucial to emphasize that in decentralized wallets, this is not possible and that the secure custody of the recovery phrase is the user’s sole responsibility.
- Essential and Mandatory Information: Nothing should be taken for granted when designing for new users. Essential information, such as the importance of the recovery phrase and the impossibility of recovering it, must be presented clearly and mandatorily.
- Verification of Recovery Phrase Order: A control instance was implemented to verify the correct order of the recovery phrase words. Given its critical importance, this step forced the user to pause and correctly write down the recovery phrase before completing the verification.
- Emphasis on the Recovery Phrase: In purely decentralized wallets, it is crucial to highlight the recovery phrase as the primary key from the beginning, rather than prioritizing, for example, a local access PIN as in Muun, which could be mistaken for global access.
- Portability of the Recovery Phrase: Users are unaware that the recovery phrase allows access to their funds from any decentralized wallet. Highlighting this advantage reduces dependence on a specific provider and increases the appreciation for this type of key.
- Recovery Process: The term “wallet recovery” was changed to “fund recovery.” We chose to use “fund recovery” instead of “wallet recovery,” as is commonly seen, to emphasize that the goal is to access the cryptocurrencies and reinforce the concept of portability.
- Designs with Low Cognitive Load: Designs were proposed that integrated security measures in a minimalist way, ensuring they are visible and accessible without overwhelming the user. Essential security steps should not be optional.
- Autonomy Messages: Clear and concise explanations were created about what self-custody means and its implications. Simple terminology was used to help users better understand these concepts.
- Quick Start: Security measures such as PIN generation or biometric data were placed after displaying the functional wallet and explaining and recording the recovery phrase, to avoid the false sense of control over the decentralized wallet.
Conclusion
Designing decentralized wallets presents an exciting challenge: balancing robust security with an intuitive user experience. Our iterative analysis, based on user feedback, has revealed key opportunities to improve this balance. By proactively addressing common confusions, setting clear expectations, and prioritizing user autonomy, we can pave the way for broader adoption of these essential tools.
While wallets with recovery phrases offer a high level of security and the crypto ecosystem champions mantras like “not your keys, not your coins,” it is crucial to recognize the diversity of needs, context, and risk tolerance among users. The wallet ecosystem must continuously evolve to offer a range of solutions, from the simplest to the most advanced, that cater to different use cases and allow each individual to choose the option that best fits their needs.